If you're going to go for a 3400, I'd pay the extra little bit for a 3500x. The 1024x768 TFT screen and the faster proc and better graphics are worth the little extra you'd pay, to me. I love my 3500, and when I was researching an upgrade from my 2300 I saw there wasn't that much price difference.
The passive digitizer took some getting used to. Instead of the mouse cursor following the pen at a couple inches, and a tap equalling a click, you have to be touching the screen for the mouse to register. There are a couple modes available, one where a tap is a click and a double-tap is a double-click, which makes moving the mouse without clicking hard, or a single tap is a mouse move, double tap is a single click, and triple tap is double-click. The advantage is you can operate it with any reasonably pointy object. I've gotten pretty good at using my fingernail tip (won't react to skin). A right click is the most annoying part of it. There's a right click hotpad that makes the next tap a right click instead of a left, but it seems to be hit or miss even when it makes the beep. It takes getting used to, but works well enough. The accuracy is decent enough, comparable to a 2300. The main thing is since the mouse doesn't track you don't have that innate auto-adjustment you get used to doing with the active digitizers.
I mostly run Linux on mine, but have had no trouble with Win2k or XP and the pen. I found XP to be much less glitchy and perhaps a bit faster. With Win2K I got odd memory errors, very long startup time, and sometimes it'd hang while trying to bring up My Computer. It did this through multiple reinstalls, so I don't think it was a single broken install. WinXP fixed that straight away. I hadn't actually tried it, but just did and the rotation works fine in XP. So, I'd assume it'd do fine in Win2k. Even has a 180* option.
Battery life is hard to answer. My 3500 runs 1-2 hours depending on the conservation options I enable and how bright I have the backlight. A 3400 would probably use less power, but given the age of the battery it's hard to guage. Good luck!
I've generally found, in my humble opinion, that HRS software is largely useless on this type of device. With a little practice, I can tap out stuff on the on-screen keyboard faster and more accurately than I can write. Of course, I have miserable handwriting... that said, PenX 2.02 includes HRS that seems to work as well as anything I've tried.
All in all, go for the 3500 unless you run into a 3400 at an excellent price. The 3500's graphics card is Direct3D compatible which makes it a quite decent gaming machine for older games. I've played a fair bit of Grand Prix Legends, ThieveryUT, and Homeworld: Cataclysm on it. Of course, if you're not a gamer, the only real advantage would be 1024x768 screen. ISTR the 3400 only coming in an 800x600 variety, though I could be wrong. Processor would be faster too, but it might not matter really in daily operation.
Hope this helps!